ESTATE AGENCY AFFAIRS BOARD Presentation to Arello 2014: Presented by Bryan Chaplog CEO of EAAB

1. ESTATE AGENCY AFFAIRS BOARD Presentation to Arello 2014: Presented by Bryan Chaplog CEO of EAAB

2. TABLE OF CONTENT • History of the EAAB • Functions of the EAAB • Challenges in the sector • Enforcement Activities and Penalties

3. HISTORY • The Estate Agency Affairs Act was promulgated in 1976 due to • - Large scale mismanagement of trust monies by estate agents • - Unethical behavior of Estate Agents • - Consumer complaints • - Self- regulation did not work • - Government needed to intervene and regulate

4. STRUCTURE AND RESPONSIBILITIES • The EAAB Act provides for the establishment of a 15 member Board as follows: • 5 Members from the real estate sector; • 5 Members from consumer interest; • 5 Members from professional fraternity; • The EAAB is operationally run by a CEO supported by an Executive Management team; • The staff compliment is 85 staff operating from a centralised office; • Opening regional offices in major provinces

5. STRUCTURE AND RESPONSIBILITIES • Primary Mandate of EAAB • Regulate, maintain and promote the standard of conduct of estate agents having due regard to the public interest; • Issue fidelity fund certificates to qualifying applicants; • Prescribe the standard of training of estate agents; • Investigate complaints against estate agents and institute disciplinary proceedings against offending estate agents where required; and • Manage and control the Estate Agents Fidelity Fund. • Secondary mandate • The EAAB is the Supervisory Body of the estate agency profession pursuant to the Financial Intelligence Centre Act and is obliged to take all steps required to prevent; alternatively, identify and report on, anti-money laundering and terrorist financing activities • Expanded Mandate • Title deed restoration project; • Transformation of the Real Estate Sector;

6. We regulate The EAAB issues licenses to Estate Agents to legally operate in some sectors

7. fidelity fund certificates The EAAB issues licenses to Estate Agents to legally operate in the sector

8. fidelity fund certificates ConT/… The EAAB issues licenses to Estate Agents to legally operate in the sector

9. EAAB IS THE PROFESSIONAL BODY OF THE REAL ESTATE SECTOR The EAAB has been appointed as the Professional Body for the real estate sector through the South African Qualifications Authority (SAQA). We issue professional designations - Professional Practitioner in Real Estate (PPRE) - Master Practitioner in Real Estate (MPRE) - Chartered Practitioner in Real Estate (CPRE)

10. Challenges in the Sector EAAB DOES 100 COMPLIANCE INSPECTIONS PER MONTH IN REAL ESTATE SECTOR • - We have an internal Inspectorate made up of lawyers and accountants • We have sign-up 13 external audit firms to perform compliance inspections nationally • We aim to inspect 6000 firms over a 5 year period • We include money laundering procedures in audit

11. INSPECTION STATISTICS - NON-COMPLIANCE

12. INSPECTION STATISTICS - NON-COMPLIANCE

13. Challenges in sector • We have Home Owners Associations and Gated Communities forcing estate agents to • - Pay “accreditation fees to start selling properties in gold estates, security estate e.g. “Oscar Pistorius estate” • Between $1500 - $20000 per year • HOA’s forcing sellers to pay % of selling price to the HOA as levy • Estate agent has to pay % of commission to HOA • Penalties for not using HOA “accredited agents” • Creating rules in the registration of title deeds and HOA rules

14. Challenges in sector • In Constitutional Court facing challenge on our search and seize rights vs right to privacy constitutional rights. Auction industry • Ghost Bidding in Auction Industry • Paying out claims for actions of unlicensed estate agents • Trust account mismanagement in the property management sector • Fight between liquidator and Curator over monies in the trust account

15. Solving Challenges in sector • New Act being finalised • Partnership: external audit firm regulatory bodies • Online submission of audit report of the estate agents by their own Audit firms • Blocking of Firms if audit reports not received eg 4800 firms in 2013 i.e. 45% of firms • Immediate production of charge letters based on contraventions raised on online audit report • Auditors has to report on unlicensed trading and • Trust/ business account mismanagement • Illegal trading • Training of audit firms available • Working with HOA representative bodies to agree on better practices

16. Enforcement and Penalties • We have Disciplinary Committees chaired by an Advocate/Lawyer support by 2 Estate Agents • Summon the Complainant and Estate Agent • Make a ruling that is binding • New Act will make committee like a court • A Reprimand • Fine of up to $2500 per count • Withdrawal of license • Appointment of a Curator Bonis • Take over business and bank account • Process with further legal action

17. Overall Performance of Claims • The Board has received claims from consumers that has suffered pecuniary loss at the hands of unscrupulous estate agents; • The new bill will strengthen the recovery process of these amounts from the guilty estate agents as the current legislation is lacking in this process.

18. FOCUS ON TRANSFORMATION OF THE REAL ESTATE SECTOR ‘One Learner-One Estate Agency’ Programme • The real estate sector currently comprises approximately 10 000 estate agency enterprises. • It is encouraged that each enterprise look at taking on at least one formerly disadvantaged learner as an intern estate agent under their mentorship; • The ultimate success of the programme will, of course, necessarily depend on the collaboration of all stakeholders and role-players within the sector and their acceptance of the urgency of the transformation imperative. • In this regard and the EAAB encourages firms to participate in the programme.

19. Legislation Review and the Proposed Property Practitioners Bill Cont/… • The Bill with create a legislative environment for the Authority to assist with title deed delivery nationally • The Bill seeks to promote transformation within the Real Estate Sector by requiring that all Practitioners comply with the Property Sector Charter; • It will promote operational effectiveness by ensuring that rulings of the Authority are equivalent to Magistrate court orders or rulings; • The new bill is aligned to all the recent court rulings affecting the real estate sector; • Only pay claims for lisenced estate agents

20. Thank you